<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarter ended September 30, 2000 Commission File No. 0-19944
---------------------------------------- -----------------------------
M~WAVE, INC.
--------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
DELAWARE 36-3809819
--------------------------------------------------------------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) identification No.)
216 Evergreen Street, Bensenville, Illinois 60106
--------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number including area code: (630) 860-9542
--------------
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 and 15(d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant
was required to file such reports) and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
----- -----
The registrant has 2,286,092 shares of common stock outstanding at November 1,
2000.
1
<PAGE> 2
PART I - FINANCIAL INFORMATION
ITEM 1: FINANCIAL STATEMENTS
M~WAVE, INC.
CONSOLIDATED BALANCE SHEETS
(Unaudited)
<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30,
1999 2000
------------ -------------
ASSETS
CURRENT ASSETS:
<S> <C> <C>
Cash and cash equivalents ................................... $ 2,586,885 $ 5,399,458
Accounts receivable, net of allowance for doubtful accounts,
1999- $10,000: 2000 $10,000 ................................ 2,520,070 6,952,779
Inventories ................................................. 2,030,417 6,356,141
Deferred income taxes ....................................... 1,080,940 1,504,797
Prepaid expenses and other .................................. 71,957 40,415
------------ ------------
Total current assets .................................... 8,290,269 20,253,590
PROPERTY, PLANT AND EQUIPMENT:
Land, buildings and improvements ............................ 4,863,247 4,874,747
Machinery and equipment ..................................... 7,934,816 8,477,801
------------ ------------
Total property, plant and equipment ..................... 12,798,063 13,352,548
Less accumulated depreciation ............................... (5,855,688) (6,701,188)
------------ ------------
Property, plant and equipment-net ....................... 6,942,375 6,651,360
NOTE RECEIVABLE, NET ............................................ 645,391 195,391
OTHER ASSETS .................................................... 4,700 113,488
------------ ------------
TOTAL ........................................................... $ 15,882,735 $ 27,213,829
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable ............................................ $ 1,974,067 $ 6,904,290
Accrued expenses ............................................ 508,456 1,660,526
Accrued income taxes ........................................ 0 1,374,606
Current credit line debt .................................... 0 1,500,000
Current portion of long-term debt ........................... 361,563 361,563
------------ ------------
Total current liabilities ............................... 2,844,086 11,800,985
DEFERRED INCOME TAXES ........................................... 676,273 1,111,382
LONG-TERM DEBT .................................................. 1,886,799 1,615,627
STOCKHOLDERS' EQUITY:
Preferred stock, $.01 par value; authorized, 1,000,000
shares; no shares issued .................................. 0 0
Common stock, $.01 par value; authorized, 10,000,000 shares
3,069,806 shares issued and 2,267,842 shares outstanding
at December 31, 1999, 3,089,556 shares issued and 2,286,092
shares outstanding at September 30, 2000 .................. 30,698 30,895
Additional paid-in capital .................................. 8,348,832 8,439,072
Retained earnings ........................................... 3,775,321 5,895,142
Treasury stock: 803,464 shares, at cost .................... (1,679,274) (1,679,274)
------------ ------------
Total stockholders' equity .............................. 10,475,577 12,685,835
------------ ------------
TOTAL ........................................................... $ 15,882,735 $ 27,213,829
============ ============
</TABLE>
See notes to consolidated financial statements.
2
<PAGE> 3
M~WAVE, Inc.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
Three months ended September 30,
-------------------------------
1999 2000
------------ ------------
Net sales ................................... $2,169,003 $ 18,122,341
Cost of goods sold .......................... 2,477,025 15,046,305
------------ ------------
Gross profit (loss) ....................... (308,022) 3,076,036
Operating expenses:
General and administrative ................ 445,709 597,633
Selling and marketing ..................... 140,550 491,662
------------ ------------
Total operating expenses ................ 586,259 1,089,295
------------ ------------
Operating income (loss) ................... (894,281) 1,986,741
Other income (expense):
Interest income ........................... 53,563 41,456
Interest expense .......................... (61,212) (104,711)
Rental income ............................. 51,000 51,000
------------ ------------
Total other income (expense) ............ 43,351 (12,255)
------------ ------------
Income (loss) before income taxes ...... (850,930) 1,974,486
Provision (credit) for income taxes ......... (356,052) 780,551
------------ ------------
Net income (loss) ........................... ($494,878) $1,193,935
============ ============
Net income (loss) per share basic and diluted ($0.22) $0.52
Weighted average shares outstanding ......... 2,267,842 2,283,866
See notes to consolidated financial statements.
3
<PAGE> 4
M~WAVE, Inc.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
Nine months ended September 30,
-------------------------------
1999 2000
------------ ------------
Net sales ................................... $7,748,687 $35,468,439
Cost of goods sold .......................... 7,280,143 29,185,755
------------ ------------
Gross profit .............................. 468,544 6,282,684
Operating expenses:
General and administrative ................ 1,193,91 1,748,428
Selling and marketing ..................... 438,678 1,040,975
------------ ------------
Total operating expenses ................ 1,632,597 2,789,403
------------ ------------
Operating income (loss) ................... (1,164,053) 3,493,281
Other income (expense):
Interest income ........................... 155,157 79,346
Interest expense .......................... (167,446) (219,946)
Rental income ............................. 110,000 153,000
Gain (loss) on disposal of assets ......... (135,084) 0
------------ ------------
Total other income (expense) ............ (37,373) 12,400
------------ ------------
Income (loss) before income taxes ...... (1,201,426) 3,505,681
Provision (credit) for income taxes ......... (490,320) 1,385,860
------------ ------------
Net income (loss) ........................... ($711,106) $2,119,821
============ ============
Net income (loss) per share basic and diluted ($0.31) $0.93
Weighted average shares outstanding ......... 2,267,842 2,279,251
See notes to consolidated financial statements.
4
<PAGE> 5
M~WAVE, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Nine months ended September 30,
-------------------------------
1999 2000
------------- -------------
<S> <C> <C>
OPERATING ACTIVITIES:
Net income (loss) ............................................................ ($711,106) $2,119,821
Adjustments to reconcile net income to net cash flows
from operating activities:
Gain on disposal of property, plant and equipment ........................ $135,084 $0
Depreciation and amortization ............................................ $845,500
Reserve for notes receivable ............................................. $0 $446,692
Deferred income taxes .................................................... $283,715 $131,442
Changes in assets and liabilities:
Accounts receivable-trade ................................................ ($22,543) ($4,432,709)
Inventories .............................................................. $322,012 ($4,325,724)
Income taxes ............................................................. ($774,033) $1,254,416
Prepaid expenses and other assets ........................................ ($33,587) ($77,246)
Accounts payable ......................................................... ($116,763) $4,930,223
Accrued expenses ......................................................... $64,325 $1,152,070
----------- -----------
Net cash flows (used in) provided by operating activities ............. ($106,246) $2,044,485
----------- -----------
INVESTING ACTIVITIES:
Purchase of property, plant and equipment .................................... ($200,145) ($554,485)
Proceeds from sale of property, plant and equipment .......................... $4,619 $0
Proceeds from notes receivable ............................................... $328,176 $3,308
Proceeds from sale of PC Dynamics property, plant and equipment .............. $581,965 $0
Proceeds from sale of PC Dynamics net working capital and other .............. $311,354 $0
----------- -----------
Net cash flows provided by (used in) investing activities ............. $1,025,969 ($551,177)
----------- -----------
FINANCING ACTIVITIES:
Common stock issued upon exercise of stock options ........................... $0 $90,437
Credit line debt ............................................................. $0 $1,500,000
Payments on long term debt ................................................... ($252,330) ($271,172)
----------- -----------
Net cash flows (used in) provided by financing activities ............. ($252,330) $1,319,265
----------- -----------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS ........................... $667,393 $2,812,573
CASH AND CASH EQUIVALENTS - Beginning of period ................................ $3,712,537 $2,586,885
----------- -----------
CASH AND CASH EQUIVALENTS - End of period ...................................... $4,379,930 $5,399,458
=========== ===========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the period for interest ................................... ($167,446) ($219,946)
</TABLE>
See notes to consolidated financial statements.
5
<PAGE> 6
M~WAVE,INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for
interim financial information and with the instructions to Form 10-Q.
Accordingly, they do not include all of the information and footnotes
required by generally accepted accounting principles for complete financial
statements. In the opinion of management, all adjustments necessary for a
fair presentation, consisting only of normal recurring adjustments, have
been included. For further information, refer to the consolidated financial
statements contained in the Annual Report on Form 10-K for the year ended
December 31, 1999 filed March 24, 2000.
2. BUSINESS
M~Wave, through its wholly-owned subsidiary Poly Circuits Inc. (the
"Company"), manufactures high performance printed circuit boards using
Teflon-based laminates to customers' specifications. In addition, the
Company produces customer specified bonded assemblies consisting of a
printed circuit board bonded in some manner to a metal carrier or pallet.
One bonding technique used by the Company is Flexlink(TM), a patented
process granted to the Company in 1993. The Company developed an enhanced
version of Flexlink(TM) in 1996.
On March 25, 1999, PC Dynamics Corporation, a subsidiary of the Company,
sold substantially all of its machinery and equipment, inventory and
accounts receivable and assigned all of its outstanding contracts and
orders to Performance Interconnect Corporation, a Texas Corporation. (PIC)
The purchase price paid by PIC consisted of:
(i) $893,319 in cash;
(ii) a promissory note in the principal amount of $773,479, which is
payable in nine (9) equal monthly installments commencing on
July 1, 1999; and
(iii) a promissory note in the principal amount of $293,025, which is
payable in monthly installments of $50,000 commencing on May
1,1999 until paid. The Company has collected $293,025 through
September 30, 2000.
PC Dynamics and PIC also entered into a royalty agreement which provides
for PIC to pay PC Dynamics a royalty equal to 8.5% of the net invoice value
of certain microwave frequency components
6
<PAGE> 7
and circuit boards sold by PIC for eighteen months following the closing.
PIC shall not be required to pay PC Dynamics in excess of $500,000 in
aggregate royalty payments.
In addition, PC Dynamics has leased its facility in Texas to PIC for
$17,000 per month for three years. PIC has the right under the lease to
purchase the facility from PC Dynamics for $2,000,000 at anytime during the
term of the lease. If PIC exercises its right to purchase the facility, the
remaining balance due on the royalty agreement is payable in monthly
installments of $25,000 until a minimum of $500,000 is paid.
This agreement was amended in the third quarter of 1999 whereas the Company
agreed to revise the payment schedule for Promissory Note I from 9 equal
monthly installments to 30 equal monthly installments in return for not
pursuing the purchase of the facility in Texas. The Company has collected
$131,396 through September 30,2000. The royalty agreement was also revised
to $500,000 payable in equal monthly installments of $25,000 until paid.
The Company has collected $145,000 through September 30,2000.
The Company has received $17,000 in interest payments in third quarter of
2000. The Company is reviewing the possibility of selling the facility in
Texas to PIC.
3. INVENTORIES
Substantially all the Company's inventories are in work in process.
4. DEBT
The Company has a mortgage loan of $1,737,000 for the facility at P C
Dynamics Corporation in Frisco, Texas. Interest on this mortgage loan is at
1/2 % over the prime rate. The loan is payable in monthly installments of
principal and interest and is due in October 2001.
The Company has an installment loan of $240,000 collateralized by certain
fixed assets of the Company. Interest on this loan is at the prime rate.
The loan is payable in monthly installments of principal and interest and
is due in October 2004.
The Company has a $5,000,000 line of credit available based on 80% of the
eligible accounts receivable to fund the working capital needs of the
Company. Interest is at the prime rate (9.50% at September 30, 2000) plus
1/2%. The agreement expires May 31, 2001 and is renewable annually at the
mutual consent of the Company and the lender. The Company has borrowed
$1,500,000 under the line at September 30, 2000.
7
<PAGE> 8
5. LITIGATION
The Company is a party to various actions and proceedings related to its
normal business operations. The Company believes that the outcome of this
litigation will not have a material adverse effect on the financial
position or results of operations of the Company.
8
<PAGE> 9
ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
RESULTS FOR THE QUARTER ENDED SEPTEMBER 30, 2000 COMPARED TO THE QUARTER ENDED
SEPTEMBER 30, 1999
NET SALES
Net sales were $18,122,000 for the third quarter ended September 30, 2000,
an increase of $15,953,000 or 736% above the third quarter of 1999.
Net sales to Lucent were $14,179,000 in the third quarter of 2000 compared
to $944,000 in the third quarter of 1999. Net sales to Celestica International
were $2,496,000 in the third quarter of 2000 compared to $0 in the third quarter
of 1999. Celestica International sales are directly related to Lucent. Net sales
relating to Lucent were $16,927,000 or 93% of sales in the third quarter of
2000. Net sales to RF Power were $281,000 in the third quarter of 2000 compared
to $355,000 in the third quarter of 1999.
The Company's three largest customers accounted for 94% of the Company's
net sales for the third quarter ended September 30, 2000 compared to 78% in the
third quarter of 1999.
GROSS PROFIT (LOSS) AND COST OF GOODS SOLD
The Company's gross profit for the third quarter of 2000 was $3,076,000
compared to a gross loss of ($308,000) for the third quarter of 1999. Gross
margin was at 17% for the third quarter of 2000. The increase in gross profit is
a result of increased sales and efficiencies.
OPERATING EXPENSES
General and administrative expenses were $598,000 or 3.3% of net sales in
the third quarter of 2000 compared to $446,000 or 20.5% of net sales in the
third quarter of 1999. Payroll related expenses were up $98,000 compared to the
third quarter of 1999. General and administrative expenses consist primarily of
salaries and benefits, professional services, depreciation of office equipment,
computer systems and occupancy expenses.
Selling and marketing expenses were $492,000 or 2.7% of net sales in the
third quarter of 2000 compared to $141,000 or 6.5 % of net sales in the third
quarter of 1999. Payroll related expenses were up $98,000 relating to additional
staff to handle the additional sales volume. Commissions were up $270,000
relating to the to the increase in sales. Selling and marketing expenses include
the cost of salaries, advertising and promoting the Company's products, and
commissions paid to independent sales organizations.
9
<PAGE> 10
OPERATING INCOME (LOSS)
Operating income was $1,987,000 or 11.0% of net sales in the third quarter
of 2000 compared to an operating loss of ($894,000) or (41.2%) of net sales in
the third quarter of 1999, an increase of $2,881,000. The changes in operating
income reflect primarily the changes in net sales, gross profit and cost of
goods sold and operating expenses as discussed above. The change in operating
income can be summarized as follows:
Increase in net sales $1,676,000
Increase in gross margin 4,138,000
Increase in operating expenses (1,157,000)
-----------
Increase in operating income $ 4,657,000
INTEREST INCOME
Interest income from short-term investments was $41,000 in the third
quarter of 2000 compared to $54,000 in the third quarter of 1999. Rental income
from the P C Dynamics facility was $51,000 in the third quarter of 2000 and the
third quarter of 1999.
INTEREST EXPENSE
Interest expense, primarily related to the Company's mortgage obligation on
its P C Dynamics facility and short-term borrowing was $105,000 in the third
quarter of 2000 compared to $61,000 in the third quarter of 1999.
INCOME TAXES
In the third quarter of 2000 the Company had an effective tax rate of
39.5%. In the third quarter of 1999 the Company had an effective tax credit rate
of 41.8%.
10
<PAGE> 11
RESULTS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2000 COMPARED TO THE NINE MONTHS
ENDED SEPTEMBER 30, 1999
NET SALES
Net sales were $35,468,000 for the first nine months ended September 30,
2000, an increase of $27,720,000 or 358% above the first nine months of 1999.
The first nine months of 1999 included a final shipment of a matured product
line of $1,300,000. The first nine months of 1999 also included the results of
PC Dynamics Corporation. The assets of PC Dynamics Corporation were disposed of
in the first quarter of 1999. PC Dynamics reported sales of approximately
$988,000 in the first quarter of 1999. Thus the adjusted net sales of the
Company for the first nine months of 1999 were $6,761,000. Net sales increased
approximately $28,707,000 in the first nine months of 2000 when compared to the
adjusted first nine months net sales of 1999 for the Company to the reported net
sales of the Company for the first nine months of 2000.
Net sales to Lucent were $29,128,000 in the first nine months of 2000
compared to $2,033,000 in the first nine months of 1999. Net sales to Motorola
were $110,000 in the first nine months of 2000 compared to $1,510,000 in the
first nine months of 1999. The sales to Motorola in the first six months of 1999
included a final shipment of a matured product line of $1,300,000. Net sales to
Celestica International were $2,497,000 in the first nine months of 2000
compared to $0 in the first nine months of 1999. Celestica International sales
are directly related to Lucent. Net sales relating to Lucent were $31,939,000 or
90% of sales in the first nine months of 2000. Net sales to Spectrian were
$821,000 in the first nine months of 2000 compared to $1,187,000 in the first
nine months of 1999. Net sales to RF Power were $877,000 in the first nine
months of 2000 compared to $680,000 in the first nine months of 1999.
The Company's three largest customers accounted for 92% of the Company's
net sales for the first nine months ended September 30, 2000 compared to 61% in
the first nine months of 1999.
GROSS PROFIT (LOSS) AND COST OF GOODS SOLD
The Company's gross profit for the first nine months of 2000 was $6,283,000
compared to $469,000 for the first nine months of 1999. The first nine months of
1999 included a final shipment of a maturing product line to Motorola generating
approximately $480,000 in gross profit. The first nine months of 1999 also
included the results of PC Dynamics Corporation. The assets of PC Dynamics
Corporation were disposed of in the first quarter of 1999. PC Dynamics reported
a gross profit of approximately $222,000 in the first quarter of 1999. Thus the
adjusted gross profit of the Company for the first nine months of 1999 was
$246,000. Gross profit increased approximately $6,037,000 in the first nine
months of 2000 when compared to the adjusted first nine months results of 1999
for the Company to the reported gross profit of the Company
11
<PAGE> 12
for the first nine months of 2000. The increase is a result of increased sales
and improved efficiencies.
OPERATING EXPENSES
General and administrative expenses were $1,748,000 or 4.9% of net sales in
the first nine months of 2000 compared to $1,194,000 or 15.4% of net sales in
the first nine months of 1999. The first quarter of 1999 also included the
results of PC Dynamics Corporation. The assets of PC Dynamics Corporation were
disposed of in the first quarter of 1999. PC Dynamics reported general and
administrative expenses of approximately $103,000 in the first quarter of 1999.
The Company booked a $400,000 reserve, relating to the promissory note from
Performance Interconnect Corporation, in the second quarter of 2000. General and
administrative expenses consist primarily of salaries and benefits, professional
services, depreciation of office equipment, computer systems and occupancy
expenses.
Selling and marketing expenses were $1,041,000 or 2.9% of net sales in the
first nine months of 2000 compared to $439,000 or 5.7% of net sales in the first
nine months of 1999. The majority of the increase in expenses relates to sales
commissions paid to independent sales organizations. Selling and marketing
expenses include the cost of salaries, advertising and promoting the Company's
products, and commissions paid to independent sales organizations.
OPERATING INCOME (LOSS)
Operating income was $3,493,000 or 9.8% of net sales in the first nine
months of 2000 compared to an operating loss of ($1,164,000) or (15.0%) of net
sales in the first nine months of 1999, an increase of $4,657,000. The changes
in operating income reflect primarily the changes in net sales, gross profit and
cost of goods sold and operating expenses as discussed above. The change in
operating income can be summarized as follows:
Increase in net sales $1,676,000
Increase in gross margin 4,138,000
Increase in operating expenses (1,157,000)
------------
Increase in operating income $4,657,000
INTEREST INCOME
Interest income from short-term investments was $79,000 in the first nine
months of 2000 compared to $155,000 in the first nine months of 1999. Rental
income from the P C Dynamics facility was $153,000 in the first nine months of
2000 compared to $110,000 in the first nine months of 1999.
12
<PAGE> 13
INTEREST EXPENSE
Interest expense, primarily related to the Company's mortgage obligation on
its P C Dynamics facility and short-term borrowing, was $220,000 in the first
nine months of 2000 compared to $155,000 in the first nine months of 1999.
INCOME TAXES
In the first nine months of 2000 the Company had an effective tax rate of
39.5%. In the first nine months of 1999 the Company had an effective tax credit
of 40.8%.
LIQUIDITY AND CAPITAL RESOURCES
Net cash (used in) provided from operations was $2,044,000 for the first
nine months of 2000 compared to ($106,000) for the first nine months of 1999.
Inventories and accounts receivable increased ($8,758,000). The increase in
inventory and accounts receivable relates to increased sales and the inventory
consignment agreement with Lucent. Accounts payable increased $4,930,000.
Depreciation and amortization was $846,000.
Capital expenditures to improve manufacturing processes were $554,000 in
the first nine months of 2000. Capital expenditures to improve manufacturing
processes were $200,000 in the first nine months of 1999.
The Company has a mortgage loan of $1,737,000 for the facility at P C
Dynamics Corporation in Frisco, Texas. Interest on this mortgage loan is at 1/2
% over the prime rate. The loan is payable in monthly installments of principal
and interest and is due in October 2001.
The Company has an installment loan of $240,000 collateralized by certain
fixed assets of the Company. Interest on this loan is at the prime rate. The
loan is payable in monthly installments of principal and interest and is due in
October 2004.
The Company has a $5,000,000 line of credit available based on 80% of the
eligible accounts receivable to fund the working capital needs of the Company.
Interest is at the prime rate (9.50% at September 30, 2000) plus 1/2%. The
agreement expires May 31, 2001 and is renewable annually at the mutual consent
of the Company and the lender. The Company borrowed $1,500,000 under the line at
September 30, 2000.
As of September 30, 2000, the Company has $3,477,000 of debt and $5,399,000
of cash and cash equivalents. Management believes that funds generated from
operations, coupled with the Company's cash and investment balances and its
capacity for debt will be sufficient to fund current business operations.
13
<PAGE> 14
INFLATION
Management believes inflation has not had a material effect on the
Company's operation or on its financial position.
FOREIGN CURRENCY TRANSACTIONS
All of the Company's foreign transactions are negotiated, invoiced and paid
in United States dollars.
ADDITIONAL FACTORS THAT MAY AFFECT FUTURE RESULTS
As a supplier to microwave manufacturers, the Company is dependent upon the
success of its customers in developing and successfully marketing end-user
microwave systems. The Company is currently working on several development
programs for its customers. The development of commercial applications for
microwave systems and the timing and size of production schedules for these
programs is uncertain and beyond the control of the Company. There can be no
assurance that these development programs will have a favorable impact on the
Company's operating results. Although management believes some of these products
and programs may ultimately develop into successful commercial applications,
such developments could result in periodic fluctuations in the Company's
operating results. As a result of these considerations, the Company has
historically found it difficult to project operating results.
The Company expects that a small number of customers will continue to
account for a substantial majority of its sales and that the relative dollar
amount and mix of products sold to any of these customers can change
significantly from year to year. There can be no assurance that the Company's
major customers will continue to purchase products from the Company at current
levels, or that the mix of products purchased will be in the same ratio. The
loss of one or more of the Company's major customers or a change in the mix of
product sales could have a material adverse effect on the Company.
In addition, future results may be impacted by a number of other factors,
including the Company's dependence on suppliers and subcontractors for
components; the Company's ability to respond to technical advances; successful
award of contracts under bid; design and production delays; cancellation or
reduction of contract orders; the Company's effective utilization of existing
and new manufacturing resources; and pricing pressures by key customers.
The Company's future success is highly dependent upon its ability to
manufacture products that incorporate new technology and are priced
competitively. The market for the Company's products is characterized by rapid
technology advances and industry-wide competition. This competitive environment
has resulted in downward pressure on gross margins. In addition, the
14
<PAGE> 15
Company's business has evolved towards the production of relatively smaller
quantities of more complex products, the Company expects that it will at times
encounter difficulty in maintaining its past yield standards. There can be no
assurance that the Company will be able to develop technologically advanced
products or that future pricing actions by the Company and its competitors will
not have a material adverse effect on the Company's results of operations.
15
<PAGE> 16
PART II - OTHER INFORMATION
ITEM 1: LEGAL PROCEEDINGS
None
ITEM 6: EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
(27) Financial Data Schedule
16
<PAGE> 17
SIGNATURE
Pursuant to the requirements of the Securities and Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
M~WAVE,INC.
Date: November 8, 2000 /s/ PAUL H. SCHMITT
------------------------------
Paul H. Schmitt
Chief Financial Officer
17
<PAGE> 18
EXHIBIT INDEX
EXHIBIT
NO. DESCIPTION
------- --------------------------------------------------------
27 Financial Data
18
